Reinvest your tax refund in retirement

As Americans receive their 2006 tax refunds, the temptation for many is to book a family vacation or purchase a new plasma TV. But, with the IRS estimating the average refund to be approximately $2,548*, it is also the perfect opportunity for Americans to give their retirement savings an instant boost.

“While your tax refund may feel like an instant windfall, the best bet may be not to succumb to the instant gratification of spending it right away," says Tim Schmidt, managing partner for Thrivent Financial for Lutherans. “Instead, tax filers should consider reinvesting their refund into their retirement savings. Not only will this pay out in the long run, but there may also be tax savings implications in 2007 depending on how it is invested."

According to Schmidt, traditional IRAs may offer opportunities for tax-deductible contributions based on the investor's income, filing status and whether or not his or she has an employer sponsored plan.